United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR D HUGHES (Representative)
For the Respondent	No appearance by or On behalf of the Respondents


 


MR COMISSIONER HOWELL QC

1. In this appeal Mrs Susan Jane Hughes seeks to have set aside as erroneous in law the decision of the Birmingham Employment Tribunal, set out in Extended Reasons sent to the parties on 2 August 1999 after a hearing on 28 June 1999.
2. The proceedings before the Employment Tribunal had been begun by Mrs Hughes by an Originating Application dated 11 February 1999 alleging that she had been wrongfully dismissed by her former employers the Worcester County Council, from her employment as a Cleaner at which she had worked from 15 April 1985 until the end of 1998.
3. What had happened was that Mrs Hughes, having had one previous spell off work because of a trapped nerve in 1996, had found herself suffering from back pain since the beginning of 1997 and had been continuously unable to work from January 1997 until the end of 1998. Her contract of employment with the Council had not terminated before the end of 1998 but she had been absent from work, on ground of sickness as to which there is no dispute, continuously for the whole of the two years.
4. The Council's Sick Pay Scheme for its employees in circumstances like these was in evidence before the Employment Tribunal and is among the appeal documents before us. In particular (see pages 22 – 23 of the appeal file) the basic system is that an employee who has to be away from work through sickness or injury is kept on full pay for the first six months and reduced to half pay for the six months after that, following which the normal practice is that pay ceases altogether. The employee is then left; so long as the employment contract continues, to depend on state or private insurance benefits.
5. Mrs Hughes was paid her full pay in accordance with the scheme for the first six months of her absence and the half pay entitlement for the second six months of her absence. It is also expressly provided by the Council's Sick Pay Scheme that any amounts of state sickness benefit, and as it was originally called, Invalidity Benefit received by the employee in respect of a period of sickness while an allowance is due to them under the Council's Sick Pay Scheme, offset so that only the balance of the allowance is paid under the Council's scheme.
6. Eventually, after medical advice and a certificate from the Council's Occupational Health Consultant at the end of 1998, the Council agreed to Mrs Hughes retiring permanently from its employment on grounds of permanent ill-health. The Council understood that to have been agreed by both sides at the end of 1998, but Mrs Hughes who had been cautious when this proposal was put to her, never finally agreed to the proposal. Accordingly it is common ground on the basis of the Employment Tribunal's findings that her employment had not come to an end, on 24 December 1998, when the Council had proposed her early ill-health retirement should take place. Her employment was eventually brought to an end by formal notice, giving her the twelve weeks notice to which the length of her employment entitled her, which eventually expired on 7 May 1999: that being the effective date of termination, according to the Employment Tribunal's express finding recorded on page 4 of the appeal file before us.
7. However, the Council had not paid Mrs Hughes anything for the twelve-week period of her notice. The dispute before the Employment Tribunal was whether they were liable to pay her full pay for this period, notwithstanding that she continued to be absent from actual work through her ill health.
8. The Employment Tribunal found that she was not entitled to pay or compensation for this period, on the basis of its interpretation of the Council's Sick Pay Scheme. As the Employment Tribunal understood it, that entitled the Council to reduce to nil the amount it would otherwise have been due to pay Mrs Hughes for the twelve-week notice period, by deducting the full amount of the state long term Incapacity Benefit which Mrs Hughes was drawing throughout those twelve weeks from what would otherwise have been due to her from the Council. There is no dispute that the weekly amount of the Incapacity Benefit was in fact greater than the remuneration she would have received, had she been working her normal hours which were sixteen hours per week paid pro rota by reference to a full working week of thirty-nine hours. That reduced for all relevant employees of the Council from 1 April 1999 to thirty-seven hours which had the effect of putting up the hourly rate to which she would normally have been entitled.
9. The basis on which the Employment Tribunal reached this conclusion, by a majority was that a provision of the Council's Sick Pay Scheme set out on page 23 of the appeal file, entitled the Local Authority at its discretion, to "extend the period of allowance in an individual case if the circumstances so justify." The majority of the Employment Tribunal found this had effectively been done in Mrs Hughes' case the Council was to be taken as having exercised that discretion, by not having paid her the full amount of the wages which would otherwise have been due to her for her notice period of twelve weeks. The significance of that finding was that if the period to which she was entitled to benefit under the Council's Sick Pay Scheme had "continued" during the notice period of twelve weeks between February and May 1999, the clause entitling the Council to offset state benefits would have come into effect and resulted in an entitlement to no money at all under the Council's Sick Pay Scheme.
10. This was said to be achieved by an interpretation of the offsetting provisions for "state benefit and sickness benefit", under paragraph 5(d) of the Council's scheme which deemed those expressions to include Invalidity Benefit under the Social Security Acts 1975 – 1982. The way in which a total offset was said to be achieved in Mrs Hughes' case was that the long term Incapacity Benefit under the Social Security Contributions and Benefits Act 1992 had succeeded what was formerly called Invalidity Benefit, as the long term insurance benefit for people away from work through illness.
11. The majority decision of the Employment Tribunal on this issue and the views of the dissenting member of the Tribunal, are explained in paragraphs 14 –16 of the Tribunal's extended reasons as follows: -

"14 But the Scheme also provides in clause 5(a) that the Respondent "may at its discretion, extend the period of allowance in an individual case if the circumstances so justify." In this case, the Respondent sought to exercise this discretion during the applicant's notice period so that no money was payable to the Applicant because she was in receipt of Incapacity Benefit in a sum greater than her normal earnings.

15 The question which has taxed the Tribunal is in interpreting the word "extend" in relation to exercising the Respondent's discretion to extend the period of allowance. There are two possible interpretations. Firstly, the period of allowance can only be extended if the period of the extension follows on immediately after a period during which an allowance might have been payable under the Conditions of Service. This would mean that it was not possible to extend in the Applicant's case since no allowance was payable immediately prior to her notice period.

The second possibility is that the Respondent can exercise its discretion to extend the period of allowance at any time during the applicant's employment including, as in this case, during her notice period.

16 The Tribunal is divided on this issue. The majority view is that it is in keeping with the intent of the Conditions of Service to give the Respondent a discretion to extend the period of allowance by paying it at any time during the employee's term of employment. This will include the employee's notice period. Indeed this must be the correct interpretation in order to allow the employer to reinstate the allowance in cases where it is justified on the grounds of the genuine hardship of the employee.

The minority view was the meaning of "extend" in this context should be taken literally so that the period of allowance could only be extended (and not later resumed) immediately following a period during which it was payable under clause 5(a) of the Conditions of Service."

12. As we have already indicated, the majority view prevailed and on that basis the Employment Tribunal held that the period of "allowance" under the Council's Sick Pay Scheme had been artificially reinstated, for the period of Mrs Hughes' notice entitlement only so as to deprive her of anything either under the Council's Sick Pay Scheme, or under her normal entitlement to pay for a period of notice even though she happened to be absent from work because of sickness or injury.
13. Apart from the question of the effect of the Council's Sick Pay Scheme and its provisions for offsetting State Benefits, we are satisfied that there is no doubt whatever, that Mrs Hughes was entitled to receive pay, at the full rate appropriate to her for her working hours, from the Council for the period of her notice, which in her case was twelve weeks. That is a statutory entitlement under Section 88 Employment Rights Act 1996. As expressly provided by Section 88 (1)(b), the entitlement and the liability of the employer to pay the normal rate of remuneration for the hours worked, includes hours in the notice period for which the employee is incapable of work because of sickness or injury. The only relevant provision for deduction from that statutory entitlement is under Section 88 (2) under which any other payments actually made to the employee by the employer in respect of the relevant part of the period of notice, for example, by way of sick pay, maternity pay, holiday pay and so forth, is stated to go towards meeting the employer's liability under Section 88(1). It is common ground and there is no doubt that no payments were in fact made by the employer to Mrs Hughes in respect of the relevant twelve weeks notice period, so that Section 88(2) does not prevent her claim.
14. Our attention was also drawn to the provisions of Section 90 of the Act under which there is a provision for the deduction or offset of certain benefits under the State Insurance Scheme, but these are limited to short-term Incapacity Benefit and Industrial Injury Benefit. As the Employment Tribunal rightly held the provisions of that section have no application here, because the benefit being drawn by Mrs Hughes was the long-term Incapacity Benefit which under the Social Security legislation is quite distinct from the short-term benefit referred to in Section 90.
15. Mr Hughes, who has argued the case on behalf of his wife before us with great clarity, submits that she has her entitlement under the statutory provisions to which we have just referred. There is nothing that deprives her of that entitlement and the Tribunal were in error in artificially stretching the meaning of the Council's Sick Pay Scheme so as to deprive her of the money that would otherwise have been due to her. The Council themselves have sent a letter to the Employment Appeal Tribunal saying that after consideration they have decided it is not right for them to incur the expense of attending before us and arguing the case against Mrs Hughes' appeal; and we have also been furnished with a copy of without prejudice correspondence from which it appears that the Council has made an offer to Mrs Hughes, though expressly on terms that it was not accepting legal liability for any payment. However, we have to decide whether the decision of the Employment Tribunal was actually right as a matter of law or not in order to dispose of the case.
16. We are unanimously of the view that the majority of the Employment Tribunal misdirected themselves in the interpretation they put on the Council's Sick Pay Scheme and that the view of the minority member was the correct one as a matter of law. It seems to us a most unrealistic interpretation to put on the provisions of the Council's Sick Pay Scheme, after a period of some twelve months in which no allowance had been paid under the Sick Pay Scheme because no extension of the sick pay entitlement period had been given by the Council, to then hold that there should be a wholly artificial "extension" suddenly imposed for the sole purpose of depriving Mrs Hughes of what would otherwise be her statutory entitlement. That appears to us to be an artificial and incorrect way of reading the terms of the Sick Pay Scheme and what happened. Although the Employment Tribunal does not appear to have referred to this, it would also have raised questions of the propriety of a local authority acting in such a way under the terms of its scheme for the sole purpose of depriving its employee of her statutory payment. We do not however, need to go into that because we are satisfied that the minority member's interpretation of the terms of the scheme was the correct one. No real question of Sick Pay entitlement under the Council's scheme being "extended" can be considered to have arisen in this case at all.
17. Accordingly we are satisfied that there was no provision in the Council's Sick Pay Scheme or in the Employment Rights Act which deprived Mrs Hughes of her statutory right under Section 88 to her normal rate of pay for the twelve weeks of her notice period. On that footing, we allow the appeal, set aside the decision of the Employment Tribunal and substitute our own decision that Mrs Hughes is entitled to be paid the correctly calculated amount of her remuneration for the twelve weeks notice period. The amount claimed is recorded in paragraph 2 of the Employment Tribunal's extended reasons on page 4 of the appeal file as being £791.04, but Mr Hughes told us that when the matter was before the Employment Tribunal the Tribunal's attention was not drawn to the fact that the correct hourly rate had increased from 1 April 1999, as a result of the shortening of the general working week by reference to which the hourly rates were calculated. We accept Mr Hughes' adjusted figure of £811.59 as being the amount of Mrs Hughes' entitlement on the basis of what he has told us; if of course, that is factually incorrect then the matter may be mentioned to us again, but as the amount involved is only some £20, we hope that that will not be necessary and this will be the end of the matter.
18. For those reasons this appeal is allowed and we substitute our own decision in the terms that we have indicated.